Multistrat Massacre: Steve Cohen, Millennium, Citadel Suffer "One Of Worst Months Ever"

While the S&P is struggling to eke out some modest gains for the year in the last month of the year, for hedge funds 2018 has not only been a scratch, but also one the worst years since the financial crisis, as the following chart - which reveals that most hedge funds haven't generated any alpha (or beta) in the past four years - shows.

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Earlier this week we reported that notable name, Balyasny Asset Management, was hit especially hard when between losses in 2018 and client redemptions, the fund lost over $4 billion in AUM, leading to the termination of 20% of its workforce. However, it was not until November, that some of the most marquee names were hammered for the first time in years.

According to Bloomberg, the holy trinity of multi-strategy hedge fund managers who run "silo" based asset management firms, billionaires Ken Griffin, Izzy Englander and Steve Cohen, posted monthly losses in November that ranked among their worst ever as stock hedge funds dumped holdings at a rate not seen since the financial crisis, while other assets such as credit and oil suffered dramatic losses.

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Griffin’s Citadel lost about 3% last month, its poorest showing since the first quarter of 2016 when Citadel's Surveyor Capital suffered jarring losses on its commodities book. Englander’s Millennium Management, which has had a remarkable - some say almost Bernie Madoffesque - track record of virtually never posting a down month, slid 2.8%, its third-worst month on record. Meanwhile, Cohen’s Point72 Asset Management - which this year was reopened for outside investors - lost 5%, wiping out its 2018 gains.

What is notable is that the three multi-strat funds stumbled after posting surprisingly strong numbers in October when stocks suffered even greater losses, and when the multi-manager firms rode out a nearly 7% plunge in the S&P 500 Index with only minimal losses. However, the contagion from equities, which sent both credit and commodities tumbling, finally took its tool. And, according to Bloomberg, the damage suffered by these hedge funds underscores the risk faced by firms that farm out money to dozens of internal managers who all run their stock portfolios in similar ways: When other hedge funds cut and run, the multi-manager giants can get caught up in the havoc, i.e., when one investor tries to flee a burning hedge fund hotel, they all do, and the result ends up being a disaster.

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